VMware 2012 Annual Report Download - page 11

Table of Contents
Customers
Our customer deployments range in size from a single virtualized server for small businesses to thousands of virtual machines for our largest
enterprise customers.
During 2012, two distributors, who purchased software licenses and software support from us for resale to end-
user customers directly or via
resellers, each accounted for over 10% of our worldwide revenues. Arrow Electronics, Inc. and Tech Data Corporation accounted for 15% and
12%
, respectively, of our worldwide revenues in 2012. Our distribution agreements are typically terminable at will by either party upon 30 to 90
days' prior written notice to the other party, and neither party has any obligation to purchase or sell any products under the agreement. No other
channel partner accounted for more than 10% of our revenues in 2012.
Competition
The cloud computing, end-user computing and virtualization markets are inter-related and rapidly evolving. We experienced increased
competition during 2012 and expect it to significantly intensify in the future. We compete with large and small vendors in different segments of
the cloud computing, end-user computing and virtualization markets, and expect that new entrants will continue to enter the market and develop
technologies that, if commercialized, may compete with our products.
We believe the key competitive factors in the cloud computing, end-user computing and virtualization markets include:
The cloud computing market is in a high state of flux with both established and new technology companies vying for thought leadership and
market share. Currently, Amazon EC2, Microsoft Azure and emerging open source efforts present alternatives to VMware's hybrid cloud
computing vision.
Microsoft is also our primary competitor for data center virtualization solutions. In 2012, Microsoft released improved versions of its Hyper-
V virtualization offering and System Center suite of virtualization management products and released further System Center enhancements in
early 2013. Microsoft's offerings are positioned to compete with our virtual infrastructure, virtualization management and some of our free data
center product offerings.
We also compete with Citrix and its collaborations with Microsoft for end-user computing solutions and with companies whose
virtualization products are based on emerging open source technologies. In addition, we compete with companies that take different approaches
to virtualization. Furthermore, our VMware vSphere editions compete with products that provide high availability clustering, workload
management and resource management.
We also expect to compete with new entrants to the cloud computing, end-user computing and virtualization markets, which may include
parties currently selling our products and our current technology partners. Existing and future competitors may introduce products in the same
markets we serve or intend to serve, and competing products may have better performance, lower prices, better functionality and broader
acceptance than our products. Our competitors may also add features to their cloud computing, end-user computing and virtualization products
that are similar to features that presently differentiate our product offerings from theirs. Additionally, some of our competitors may make
acquisitions or enter into partnerships or other strategic relationships with one another to offer more comprehensive solutions than those they
individually had offered. Some
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the level of reliability, interoperability and new functionality of product offerings;
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the ability to provide comprehensive solutions, including management capabilities;
• the ability to offer products that support multiple hardware platforms, operating systems, applications and application development
frameworks;
• the ability to deliver an intuitive end-user experience for accessing data, applications and services from a wide variety of end-user
devices;
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a proven track record of formulating and delivering a roadmap of compelling software and service capabilities;
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pricing of products, individually and in bundles;
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the ability to attract and preserve a large installed base of customers;
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the ability to attract and maintain a large number of application developers for a given cloud ecosystem;
• the ability to create and maintain partnering opportunities with hardware vendors, infrastructure software vendors and cloud service
providers;
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the ability to develop robust indirect sales channels; and
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the ability to attract and retain cloud, virtualization and systems experts as key employees.